Every business in Arkansas pays an unemployment insurance tax. A business with no previous employment record in Arkansas is taxed at 3.8% on the first $12,000 of each employee's earnings until an employment record is established, usually within three to five years. Contribution rates range between 1.0% and 10.9%.
Each firm's employment record is determined primarily by its taxable payroll and history of employee involuntary termination. The tax is determined by past experience and the amount of the reserve-ratio. The reserve-ratio is the excess of contributions paid over benefits charged as related to payroll. The higher the reserve-ratio, the lower the tax rate.